This will be a short note, given the number of things in the hopper today. I have just provided a graph of core inflation published this morning for the eurozone, which illustrates the degree to which the ECB is not meeting its inflation mandate.
There are so many things that need to be said, but they will have to wait until tomorrow. However, take a look at this link, which makes me feel a bit less isolated:
· "I am ... almost astonished that there is so much hysteria -- and unfortunately to a certain extent especially here in the country where we are guests -- about inflationary pressures."
Core CPI on eurozone
It is more dangerous to fall below the target range (deflation trap - 0% lower bound) than to overshoot it!
Of all people, I would have never thought that the analyses developed in these notes would be one day taken up the chief of the Austrian Central Bank!
And here's a little update on the European negotiations:
How the Euro Rescue Package Came Together (Der Spiegel).
Now, after a day in which Greek debt has begun to turn around, as has the Eurostoxx, not to mention the Bund (are the Chinese propping up the euro?!), we have the pleasure of presenting you a report on a topic with which are regular readers have become well acquainted...from Australia (ah, the magic of Internet):
Europe's deflation trap. (Business Spectator)
Have a good day.
Asset allocation biases
Positive on equities and negative on core eurozone nation debt, with a huge steepening bias, and positive on peripheral eurozone nation debt.
Disclosure: Long 20 years OAT and 30 years BTP Zero Coupons, EDF Corp 5 Years 4.5%, Grece 2 Y and 10 Y bonds